The author is an analyst at NH Investment & Securities. He can be reached at [email protected]. — Ed.

We see sufficient conditions and justification for bank stocks to become national stocks. To achieve this, we propose both increasing shareholder returns and considering monthly dividend payouts.

Unrelenting historically high profits in banks…

Buoyed by new records set last year, we expect bank profits to reach new all-time highs this year. For our four hedge banks, we see a combined 2021E NP of W14.23tn (+31.6% yy) and a 2022F NP of W15.02tn (+5.6% yy). . Boosted by three base rate hikes (in August 2021, November 2021 and January 2022), the uptrend of the NIM is expected to continue at least until 1H22. With further upside likely in 2H22, we expect further upward revisions to sector earnings consensus.

….but, consumers are wary of the sector

Despite expectations for strong earnings, consumers tend to have an uncomfortable view of the banking sector, as the main source of its income is interest income on loans.

In particular, it is uncomfortable for some that the profits of banking players strengthen during periods of rising interest rates, since many consumers and businesses suffer from interest rate increases, while banks benefit. . As a result, some voices consider high bank revenues to be unreasonable.

Response to contention: transform into national stocks; to do this need to increase shareholder return, consider monthly dividends

In our view, one of the answers to alleviate this malaise is to transform banking stocks into national stocks. If so, the revenue generated by the citizens would be returned to the citizens.

In our view, to make bank stocks national stocks: 1) higher shareholder return is needed, believing that the current level of payout ratio (25~26%) is inadequate and that the quality of bank assets is high enough to increase shareholder returns; and 2) monthly dividend payments must be considered. We note that bank stocks could provide a stable income option for individual investors nearing retirement.